Financial Services Ireland

ESG investing under fiduciary management

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ESG investing under fiduciary management

“We expect ESG to be the default for investors and asset owners globally…” –  a response from one of the Fiduciary Managers surveyed for our ESG investing under fiduciary management white paper recently published in the UK. (Download the report from the link below.)

There is no doubt that the Environmental, Social and corporate Governance (ESG) lens as a sound way for asset managers to evaluate the future financial performance of companies is growing in popularity.

The UK’s Institutional Asset Owner investor base are very significant investors in Irish funds. Fund managers should ensure that both the Asset Owner community and their Fiduciary Managers are fully aware of their ESG credentials. The European Securities and Markets Authority (ESMA) has been mandated to prepare technical advice on the integration of sustainability risks and factors in the UCITS Directive and AIFMD Directive. It aims to do this by 30 April 2019. Managers who wait until they are compelled to make ESG disclosures may find they are losing market share to those who are voluntarily disclosing methodologies and other material.

This research shows significant consensus over ESG investing among fiduciary managers:

  • One shared view is that the arguments in favour of implementing ESG investing are becoming too powerful to ignore.
  • Another is that trustees are increasingly focused on ESG and fiduciary managers’ ESG capabilities.
  • A third is that the quality of ESG-related data and analysis poses a significant, if decreasing, challenge to success.

In contrast, the findings show that different fiduciary managers are taking very different approaches to addressing the growing demand for ESG investing — and the challenges it presents. Practices and processes vary in a number of key areas, especially when it comes to analysis and implementation.

Looking ahead, we see a number of positive indicators emerging from the research. One is that fiduciary managers are increasingly able to help asset owners of all sizes implement ESG investing. Another is that every firm, in its own way, is continuing to develop its ESG capabilities. Trustees have more assistance available now than ever before in determining their ESG requirements and influencing the ESG agenda further in line with their own beliefs.

We also detect a strong commitment to co-operation and collaboration. That includes an appreciation of the importance of close communication with clients; of the value of client education; of the need to work closely with external managers; and of the importance of crossindustry co–operation and knowledge sharing.

As one fiduciary manager put it, “we believe investors do not need to adjust their financial goals to align their investment strategy with purpose.” If true, that is something that will ultimately benefit us all.

If you have a question arising from the above, don’t hesitate to reach out to us.

Paul Traynor

Partner and Advisory Lead, Wealth & Asset Management
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